India's cotton imports rose by around 800,000 bales to 2.3 million bales till August 31 this cotton season compared to the previous cotton season due to lower international rates than domestic prices, India Ratings and Research said on Friday.
The cotton season runs from October to September.
Cotton prices continued to reduce in August 2019, mainly due to a fall in international prices. The agency expects the prices to fall further as global production is likely to be higher than the demand growth.
"With local prices (MSP) being higher than international prices, cotton imports are rising. Till 31 August 2019, the import of cotton was 2.3 million bales, up 0.8 million bales than that recorded in the previous cotton season. This would further reduce domestic cotton prices," India Ratings and Research said in a report.
Cotton yarn continues to see reduced exports owing to low demand of yarn and increased competition.
"Exports fell 40 per cent month-on-month during July 2019, mainly due to the 80 per cent year-on-year fall in the demand from China. China has entered into second phase of free trade agreement with Pakistan on goods worth USD 64 billion, of which cotton yarn directly competes with India's," the report said.
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While manmade fibres saw the second consecutive month of stabilisation on stable crude prices in August 2019; however, the instability in prices in September 2019 with the attack on refinery of Aramco, Saudi Arabia created pressure on margins of synthetic fibres for some time, the agency observed, adding that the prices have corrected by 20 per cent subsequently with the positive news of fast recovery of the attacked sites.
However, apparel exports are seeing a moderate recovery with the stabilising demand from the US.
"The US-China trade war seems to have no major impact as the apparel exported by China for July 2019 were 35 per cent higher than those in the previous month. India is yet to see the benefit in the trade war, as only a 10 per cent month-on-month increase in exports was recorded in July 2019," the report noted.
The agency has published the August 2019 edition of its credit news digest on India's textile sector. The report highlights the trends in the sub-segments of the textile sector, including cotton, man-made fibres, yarns, fabric with a focus on commodity prices, imports/exports, production and recent rating actions.